Current Affairs

Maintaining Effective Governance in Times of Covid-19

6th April 2020

Boardroom's new legal contributor Giulia Mauri explores the legal aspects of having to make decisions and ratifying them without actually meeting.

The outbreak of the coronavirus and the measures taken by governments in response to the current global pandemic mean that associations have to take prompt action in response to the current situation: taking measures that guarantee the safety of all employees, evaluating the impact of the relevant national and international measures on the functioning of the association, cancelling or postponing meetings and events and getting used to a new way of communicating with employees, members and directors. 

All of the measures above need to be taken without holding physical meetings. 

Compared to pandemics that took place in the past, we have a great advantage: we live in a hyper-connected world that allows us to work from home, stay in touch with colleagues and be connected on teleconference or video conference at any time of the day (or night). 

The technology is therefore there to help associations organising virtual meetings and events. However, as it often happens, the law is not necessarily in tune with the new technological capabilities and in several countries board meetings and members’ general assembly must be held physically. 

The rationale behind this requirement is that an association should be governed in a democratic and transparent way. Therefore, directors and members should have the opportunity to participate to meetings, ask questions, and discuss amongst each other before decisions are taken. Holding meetings by tele- or video-conference or by written resolutions or similar methods should be the exception. 

As a result, most legal systems limit the possibility for the Board or the members to take decisions without allowing for proper discussions to take place (physically) amongst the participants. 

Several options

However, in these times of crisis, several options are available. 

First of all, the CEO or the Secretary General are usually allowed to take decisions concerning the day-to-day management of the association. It would be useful, in these times, that CEOs and Secretary Generals are also allowed to take decisions and sign documents that are urgently needed without having to wait for a Board to be properly convened and held. In these cases, it is however always advisable, in order to protect the CEO or Secretary General from leaving himself/herself open to possible liability that these ‘urgent’ decisions are subsequently ratified by the Board or other relevant competent body. This could be the case, for example, for measures urgently needed to protect the health and safety of staff. 

Depending on the jurisdictions where the relevant associations are located, Boards and General Assemblies can often take decisions by using one of these three options: 

  • The meeting may be held by teleconference or video-conference; 
  • The relevant decisions may be taken by written procedure; or 
  • Participants may give a power of attorney to one or more directors or members who could then meet in person, respecting applicable legislation on social distancing. 

Giulia Mauri is Boardroom’s new legal contributor. She is the founder of Kadrant, a Brussels based law firm with a strong specialization in the not-for-profit sector. Giulia’s knowledge not only linked to her work in advising associations, but also to her participation in the activities of various associations as board member or chair of various working committees.

The choice amongst the various possibilities is not always easy from a purely legal point of view. Indeed, the articles of association and the internal regulations of the relevant association should be checked to make sure that one or more of the options mentioned-above are indeed allowed. Moreover, certain juridical systems are more open to technological advancements then others. Applicable laws should also be checked as this may even require, in certain cases, that decisions of the general assembly (in particular the assembly approving the financial statements) need to be taken before a notary. 

In order to allow associations to continue functioning during these times, several countries have taken specific Covid-19 related measures explicitly allowing associations to take decisions by tele-conference or video-conference. 

Navigating through the pandemic

In the light of the above, it is therefore likely that, through the application of existing national rules, or thanks to specific state-adopted measures, most associations are managing to navigate through the pandemic and to hold their board meetings and general assemblies.

Once the meetings have been held, however, minutes need to be signed and in this case, associations are confronted with other legal issues. Indeed, it would be very difficult (or impossible) to collect original signatures on the relevant documents. 

Therefore national law should be checked to verify what is the value of a document signed remotely and sent in a scanned PDF forma. Several IT solutions are also available to guarantee a higher level of reliability, such as solutions for advanced or qualified electronic signatures.

When the coronavirus will hopefully be behind us, I believe that most associations will discover that they have taken a giant leap towards digitalisation in a very short period of time. 

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